Oil prices continued to decline early on Wednesday due to concerns about global demand stemming from China's sluggish economic growth and an anticipated increase in U.S. commercial inventories. Despite heightened tensions in the Middle East, these worries outweighed supply fears.
Brent futures for June dropped 56 cents to $89.46 a barrel, while U.S. crude futures for May fell 63 cents to $84.73 a barrel by 0337 GMT.
Investors are closely monitoring how Israel will respond to Iran's recent attack, which has contributed to geopolitical tensions. There's a wait-and-see approach regarding the possibility of a wider regional conflict and its potential impact on oil supplies.
In China, although the economy saw faster growth than anticipated in the first quarter, indicators from March such as property investment, retail sales, and industrial output suggest weak domestic demand, affecting overall momentum.
Additionally, concerns were raised by an increase in U.S. crude inventories reported by the American Petroleum Institute, with official data from the Energy Information Administration expected on Wednesday at 10:30 a.m. (1430 GMT).
In the Middle East, Israel's war cabinet postponed its meeting to decide on a response to Iran's attack until Wednesday. Western allies are considering imposing new sanctions on Iran to dissuade Israel from escalating the situation, but analysts doubt the Biden administration will take drastic action that could impact oil prices and anger China, Iran's top buyer.
"Sanctions are already in place, but enforcement has been lax in recent years. The key question is whether there will be stricter enforcement now," noted analysts from ING in a client note.
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